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Tesla Motors five point performance plan for 2016; CEO and CTO increase stake in TSLA

Tesla Motors five point performance plan for 2016; CEO and CTO increase stake in TSLA

Posted on
February 13, 2016
by
Matt Pressman

According to Tech Insider* Tesla Motors (NASDAQ:TSLA)has a very busy year ahead of it. Coming soon, Tesla will unveil its first mass market car, the Model 3, on March 31st. The company also noted it's on schedule to produce and deliver the Tesla Model 3 by 2017. But in order to meet that aggressive deadline, Tesla has an important to-do list this year. The company plans to invest in its factories, stores, and charging infrastructure to get ready for the production of its mass market car.

That said, Tesla also plans to decrease its capital expenditures spending and become cash flow positive in 2016. In addition, there is another important signpost for investor affirmation: Tesla's top management has bought an even larger stake of TSLA as a sign of supreme confidence. Why? Well... in order to synthesize information delivered during Tesla Motors' 4Q earnings call and shareholder's letter relative to the 2016 roadmap ahead, let's break down Tesla's 5 point performance plan for 2016.

1. It will invest in finishing the Gigafactory.

In its shareholder letter, Tesla said it plans to invest in new equipment to support cell production at the Gigafactory, Tesla's giant battery manufacturing plant in Sparks, Nevada. The Gigafactory will be key to helping the company meet its goal of selling some 500,000 cars by 2020 because it will help the company achieve "extreme economies of scale," which will help bring down the cost of its lithium-ion batteries that are used to power its electric vehicles.

Source: Tech Insider* (Tesla Motors)

2. Tesla will build out its facilities to begin production of the Model 3.

Tesla says it's going to begin installing the machines needed to produce its upcoming Model 3. The new car will be produced at Tesla's production factory in Fremont, California — at least in the beginning. However, Musk recently said he is not opposed to begin producing Tesla cars for the Chinese market in China. The new equipment will help its factory become even more robust ahead of the Model 3 launch. [To showcase an example of ongoing progress at Tesla's factory, press the play button below to check out "Model X gets its wings" just posted yesterday by Tesla Motors on Instagram]

Tesla currently has more than 140 retail stores and service centers around the world. But the company wants to grow that number so that as the Tesla Model 3 comes off the production line, there are plenty of showrooms where they can show off (and service) the vehicle.

Source: Tech Insider* (Kim Kyong Yoon, Reuters)

4. Tesla will also build out 300 new supercharger locations.

Tesla currently has some 597 Supercharger stations with 3,481 superchargers around the world. But with the Model 3 on the horizon, the company wants to increase that number. Tesla Superchargers provide 170 miles of range with just 30 minutes of charging. To put that into perspective, it takes about an hour to get 58 miles of charge time if you used Tesla's Wall Connector on a 240-volt circuit at home.

Source: Tech Insider* (Jess Cooper, Flickr)

5. Tesla plans to spend less.

Yes, these actions will require significant investment from Tesla, but, as reported by Motley Fool, "In 2016, Teslaplans to spend less -- specifically when it comes to capital expenditures, or CapEx... 'My mandate from Elon is clear: cash is king,' said Tesla's new CFO Jason Wheeler. 'There's some real steps we're taking as a company to get ourselves to net cash flow positive for the year.' He went on to explain that the most important step toward net cash flow positive is Tesla's plan to spend less on CapEx during 2016 than it did in 2015. Specifically, Tesla plans to spend $1.5 billion on capital expenditures -- down from $1.6 billion in 2015."

Source: Tech Insider* (Stephen Lam, Reuters)

Conclusion: Tesla's road ahead.

Since Tesla's fourth quarter earnings announcement on Wednesday, Tesla's stock rose 4.7 percent to $150.47 on Thursday and was among the Nasdaq's top percentage gainers in a weak overall market. A seasoned Musk investor, Nancy Pfund [see below], Managing Partner of DBL Partners, a venture capital firm that's invested in Tesla Motors, SolarCity, and SpaceX reminds us that investing in Musk's companies is, "not for the faint of heart. This is not a story that plays out in a quarter." Yet, she has deep faith in his long-term vision and ability to execute. "He's the Mount Everest of innovative visionary minds," she said. "He has a tolerance and an ability to move the big ideas forward without getting cowed by those that would settle for a smaller vision."

Another positive sign: top management at Tesla appears bullish on 2016's prospects. CEO Elon Musk just exercisedanother $108 million worth of options just a few weeks after exercising over $100 million. And, Tesla Co-Founder and CTO J.B. Straubel just exercised options to buy 107916 shares. This transaction almost doubled his stake from 134,902 to 242,818. It's definitely telling when top management doubles down like this -- it's the ultimate evidence of having "skin in the game" -- and it's likely to add increased attention to performance in 2016 and the years ahead.

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